Needs Well (TSE:3992) Is Paying Out A Larger Dividend Than Last Year

Needs Well Inc.'s (TSE:3992) dividend will be increasing from last year's payment of the same period to ¥12.00 on 24th of December. This will take the annual payment to 2.3% of the stock price, which is above what most companies in the industry pay.

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Needs Well's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Needs Well's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, EPS could fall by 0.8% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 59%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

See our latest analysis for Needs Well

Needs Well Doesn't Have A Long Payment History

Needs Well's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 5 years was ¥4.25 in 2020, and the most recent fiscal year payment was ¥12.00. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Needs Well May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Unfortunately, Needs Well's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Needs Well's Dividend

Overall, we always like to see the dividend being raised, but we don't think Needs Well will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Needs Well that investors need to be conscious of moving forward. Is Needs Well not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.